Chinese Electric Scooter Startup NIU Files IPO
Another week, another announcement that a Chinese tech company will go public on a U.S. stock exchange. This time around, it’s Chinese electric scooter startup NIU, which looks to raise up to $150 million when it premieres on the NASDAQ under the ticker symbol NIU. We briefly crossed paths with NIU last year for our feature on street-legal electric scooters. Now, let’s take a ride with this Chinese electric scooter company and see where it takes us.
A Chinese Electric Scooter that is Smart
Founded in 2015, NIU is incorporated in the Cayman Islands (not suspicious at all), but with offices in Beijing and Hong Kong. It has raised $45.5 million, including a $25.5 million Series B in March, mainly from hometown VC firms. It offers several different lines of smart electric scooters, mainly in China, but is pushing hard into Europe, as well as Southeast Asia. The “smart” part is all about an app that provides real-time info about the e-scooter, such as daily riding habits, and other things like anti-theft alerts and directions to the closest charging station.
In return, NIU collects 462 types of data points for monitoring and diagnostic purposes, amassing more than 40 terabytes of data, as of June 30, 2018. NIU says it collects the data to improve e-scooter performance and to derive insights into its customer base. No word on whether those “insights’ are shared with the government for China’s social credit score program. Not that these e-scooters are going to break the speed limit.
A Chinese Electric Scooter for Any Occasion
NIU offers three lines of e-scooters: the U-Series, M-Series, and N-Series. At the heart of each e-scooter is a lightweight lithium-ion battery. As we’ve discussed before, lithium battery technology is becoming as valuable as oil, powering massive investments in battery startups, as well as the creation of a pure-play lithium battery IPO.
NIU leverages battery technology from Panasonic to power its different classes of e-scooters. Its lightest battery for its U-Series e-scooter weighs less than 12 pounds, which allows it to be easily removed and charged, with a range of about 20 miles. Want more freedom? NIU’s M+ e-scooter, built for the European market, packs a battery more than twice as heavy but reportedly with a range of about 80 miles.
The company’s beefiest e-scooter to date, the N-GT, sports two separate battery packs, providing a range of more than 100 miles. Its Bosch motor can reach speeds of 43.5 miles per hour, climbing grades as steep as 28 percent. While it won’t get you to Sturgis, the N-GT can navigate pretty much any city. It also costs more than any other NIU scooter at about $5,300.
That’s a pretty good chunk of change for just about anybody, which is why NIU has developed some pretty sophisticated anti-theft technology for its e-scooters. Any unauthorized movement of the scooter will trigger alarms on the scooter and alerts through the app. An embedded GPS means that owners can watch when thieves race away with their property.
Chinese Electric Scooter Company by the Numbers
The company has sold more than 430,000 e-scooters to date, including 125,000 through the first six months of this year, appealing mainly to the Millennial crowd, which is extremely hip to China’s increasingly connected mobile economy. NIU posted revenue of $116.3 million in 2017 and a net loss of $27.9 million. The company is on pace to well exceed both numbers this year, with net revenues at $84.2 million through the end of June. On the flip side, it’s on pace to more than double its net losses from the previous year, down $47.6 million already through the first six months of the year.
Of course, it’s not unusual to see young startups (not to mention venerable, iconic brands like GE, which has invested heavily in emerging technology like 3D printing) to bleed red for years. NIU doesn’t expect to be profitable anytime soon, with plans to spend at least $12 million alone between now and 2019 to expand its manufacturing capacity to 700,000 units by the end of next year. No doubt that $150 million will go a long way toward expanding the company’s reach into domestic and international markets.
Market Potential of Chinese Electric Scooters
In 2017, NIU led China’s lithium-ion battery-powered electric two-wheeled vehicles market with market shares of 26 percent and 39.5 percent in terms of sales volume and sales value, respectively, according to China Investment Corporation (CIC), a sovereign wealth fund. The company’s closest competitor is in single digits for both categories. It’s no secret that China is the largest market and manufacturer of electric vehicles overall. One of its top luxury brands, NIO, recently went public with a $1 billion offering.
Not surprisingly, China is also the largest market for electric two-wheeled vehicles, where 27 million units were sold for a combined value of about $8 billion in 2017, according to CIC. There is also a strong trend away from lead-acid batteries to lithium-ion batteries, which plays to NIU’s strengths. While less than a million e-scooters were purchased last year, CIC expects some pretty remarkable growth to more than 15 million units by 2022.
NIU claims to be the “first lifestyle brand” for urban mobility in China, giving rise to NIU fan clubs in more than 50 cities around China. The Chinese are a community-oriented society – visit any city park and you’ll see loads of people dancing and singing – so the company has apparently tapped into the local zeitgeist. The Chinese are also brand conscious, which may explain why they are willing to pay an 86 percent premium over NIU’s competitors. The company also makes a few extra yuan by selling “lifestyle” accessories, spare parts and mobile app services, which accounts for about 7.7 percent of NIU’s revenue currently.
There are signs that the company can navigate international markets, where it claims to rank third in the European medium-end e-motorcycle market with a market share of 11.1 percent in terms of sales volume. In 2016, foreign sales accounted for less than 1 percent of NIU’s revenue. Today that number is about 13 percent, with distribution in 23 countries, with NIU eyeing markets in Southeast Asia and India as well.
One could argue that NIU is entering the electric vehicle market at a remarkably good time. There’s the obvious consumer interest in more eco-friendly transportation options. Chinese electric scooters may also find a sweet spot between the full EV market and the electric scooter sharing companies that are popping up around the world to fulfill that last-mile problem that bicycle sharing startups were supposed to solve. And, since it’s China, NIU can compete with its Western counterparts on price without skimping on the technology, with components from both Panasonic and Bosch finding their way into the company’s varied line of e-scooters.
However, Chinese stocks come with their own set of risks. Chief among them is that these companies operate in what is – politics aside – a dictatorship that can throw up roadblocks without warning. The ongoing trade war between the United States and China shows no signs of slowing, so that may stymie any plans by NIU to grow into U.S. markets any time soon. In addition, outside of China, Chinese brands sometimes have a hard time gaining traction due to perception of quality.
Are you paying too much in transaction fees to your broker? Check out a brokerage firm called Zacks Trade that's offering $1 trades for U.S. stocks and options until 2019. After that, you'll pay just $3 a trade or a penny a share, whichever is greater. It's one of the cheapest brokers out there and you can also trade stocks on foreign stock exchanges. Trade US stocks and options for as low as $1 per order until July 4, 2019.